Applied Rationality focuses on public policy issues and tries to take a liberal perspective that is consistent (comments to the posts will often show otherwise) with neoclassical, rational-choice economics.

Thursday, January 31, 2013

As policy choices go, the direction North Carolina should take with respect to Medicaid expansion couldn't be clearer. However, we live in interesting times.

Medicaid is a public health insurance program for certain groups of poor and needy people, mostly poor children, poor elderly people, poor blind and disabled people, and recipients of federal cash assistance. With the exception of pregnant women and some parents, NC's Medicaid program generally does not cover able-bodied, working-age adults. Not surprisingly, hundreds of thousands of poor and near-poor working-age adults in the state are uninsured.

Provisions of the Affordable Care Act (ACA) are supposed to change that, starting in 2014. The ACA allows states to expand Medicaid eligibility to all low-income people, living in households with incomes below 133 percent of the federal poverty line. For the first three years of the expansion, the federal government will pay 100 percent of the costs. Starting in 2017, participating states will have to contribute $1 for every $9 that the federal government pays.

In the original legislation, states risked losing all their federal Medicaid money if they chose not to expand their programs. However, the Supreme Court decision upholding most of the ACA scaled that back, and non-participating states will now only forfeit the federal funds directly tied to the expansion. The Supreme Court made it less costly for states, like NC, controlled by the Party of No to, um, say "no."

While NC lawmakers have the ability to say "no," they would be hurting the state far more than they would be helping it.

Wednesday, January 30, 2013

...frankly if you want to take gender studies that’s fine, go to a private school and take it, but I don’t want to subsidize that if that’s not going to get someone a job. Right now, I’m looking for engineers. I’m looking for technicians. I’m looking for mechanics.”

While the Republican legislature has bravely tried to grow the NC economy by firing teachers, police, and civil servants by the tens of thousands, the "educational elite" have undermined their heroic efforts and sunk the economy by graduating a flood of unemployable gender studies majors, Swahili speakers and navel-gazing philosophers.

Except, of course, that they haven't. The overwhelming majority of UNC system graduates complete career-oriented majors.

Tuesday, January 29, 2013

In today's Washington Post, Louisiana Gov. Bobby Jindal asks President Obama for a meeting to discuss the expansion of Medicaid under the American Care Act (a.k.a. Obamacare).

As the implementation of Obamacare unfortunately nears, every governor must decide whether to expand Medicaid. This is not a simple question. Expanding Medicaid will significantly burden state budgets across the country.

Our state’s analyses, and reports by organizations that have supported Obamacare, such as the Kaiser Family Foundation and the Urban Institute, estimate that such an expansion would cost Louisiana more than a billion dollars over the first 10 years.

Gov. Jindal proceeds to describe how awful and inefficient Medicaid is--nevermind that states, and not the federal government, operate Medicaid programs and that states have enormous flexibility in setting the parameters of the program. But let's take Gov. Jindal's point at face value, Medicaid is far from perfect.

Gov. Jindal overlooks an even bigger problem--hundreds of thousands of low-income households without insurance. The same Kaiser Family Foundation and Urban Institute report that he cites indicates that up to 398,000 low-income Louisianans (about one out of every 12 Lousianans) will gain health insurance through the Medicaid expansion in the next ten years and that the expansion will reduce the percentage of Louisianans without health insurance by up to 60 percent.

Gov. Jindal's prescription for hundreds of thousands of his state's citizens is to continue to go without health insurance while he (and other Republican governors and state houses) defer and delay.

Monday, January 28, 2013

Do gay men and lesbians face discrimination when applying for jobs? A Swedish experiment that was just published in the Southern Economic Journal indicates that they do.

In the experiment, researchers sent made-up e-mail inquiries to job openings throughout Sweden. The e-mail inquiries were identical--same wording and same age, schooling, occupation-specific experience, and surname for the fictitious candidates--except they randomly had a man's or woman's first name (Erik or Maria) and randomly included cues about the person's sexual orientation. E-mails meant to indicate heterosexual men mentioned having a wife, while e-mails for gay men mentioned a husband. Similar references to different- or same-sex spouses were constructed for heterosexual women and lesbians. Cues about sexual orientation were reinforced by a mention of participation in a civic activity (Swedish Red Cross for heterosexuals, Swedish Federation for Lesbian, Gay, Bisexual, and Transgender Rights for gay men and lesbians). The researchers then tracked the responses to the inquiries.

Overall, 30 percent of the fictitious e-mails sent on behalf of heterosexual male candidates and 32 percent of the e-mails sent on behalf of heterosexual female candidates got a positive response--either an invitation to interview or an outright job offer. In contrast, only 26 percent of the e-mails sent on behalf of gay men and lesbians generated positive responses.

Wednesday, January 23, 2013

The Washington Post cheers House Republicans' "novel plan" to suspend the artificially-created debt ceiling crisis and re-create it this summer.

House Republicans are advancing a novel plan to suspend enforcement
of the federal debt limit through May 18, a move that would lift the
threat of a government default and relieve the air of crisis that has
surrounded their budget battle with President Obama.

The measure — set for a vote Wednesday in the House — would not
resolve the dispute over how to control the national debt. But after
the traumatic “fiscal cliff” episode at the end of last year, it would
buy policymakers a little breathing room to continue the argument
without another economy-rattling deadline just around the corner.

As the Post points out, we needn't worry about a lack of artificial crises. Suspending the debt ceiling fight clears the deck for a possible government shut-down if a new budget isn't set and for mindless across-the-board sequester cuts if an alternative debt reduction deal isn't reached.

Tuesday, January 22, 2013

Churches, orphanages, and other charities currently don't have to worry about the tax man in North Carolina. They aren't charged income or corporate taxes; they can avoid sales and use taxes by claiming refunds, and certain sales by the organizations are exempt from sales tax.

However, these institutions will have to worry if the John W. Pope Civitas Institute succeeds in its proposal to raise and expand NC's sales tax.

Civitas calls for "repealing current exemptions, preferential rates, and refunds" for the sales tax. The current NC tax code allows for several refunds; the refunds and their estimated FY 2012 values are shown in the table below. The biggest refund category is for non-profit organizations, including "churches, orphanages and other charitable or religious institutions."

Monday, January 21, 2013

Pro-golfer Phil Mickelson petulantly hinted yesterday that he might retire or exile himself from California or do something else because of his increasing tax burden, which will only let him keep millions of dollars of earnings.

Washed-up golfer Mickelson will join washed-out French actor Gerard Depardieu, whose quest for tax freedom led him first to Belgium and next to liberty-loving Russia.

Closer to home, perennial News & Record LTE-writer Tony Moschetti has made nice noises about Cuba.

Sunday, January 20, 2013

The proposal by the John W. Pope Civitas Institute to eliminate North Carolina's income, corporate, and franchise taxes and replace them with a new business tax, a transfer tax on real estate, and a higher and expanded sales tax has a curious omission.

The proposal acknowledges that the changes would be regressive--would reduce tax obligations for wealthy households that have extra money that they can save and increase obligations for poorer households that spend most of their money on consumption goods.

The proposal doesn't mention the impact on retirees--probably for the reason that retirees would suffer disproportionately.

Saturday, January 19, 2013

My dad used to tell a story about how one day as a very young boy he suffered some monumental slight at the hands of my grandmother. Concluding that this slight was one too many, he stomped his foot and yelled, "I'M RUNNING AWAY, AND I'M NOT COMING BACK!"

My grandmother's response was, "We'll miss you."

My dad sulked out of the house, made it around the corner, and sat on the curb. Utterly deflated, he was back home within half an hour.

House Republicans must be feeling similarly deflated.

After stomping their collective feet and threatening to bring down the U.S. economy through a debt default, Republicans have decided to approve a small expansion of the debt ceiling that will push the issue off for three months.

Wednesday, January 16, 2013

The second part of the Sandy relief legislation--a $50 billion package to help New York, New Jersey, and other northeast states rebuild and prepare for future storms--passed the House of Representatives last night despite overwhelming Republican opposition--including "no" votes from every single member of North Carolina's Republican delegation.

Representatives Foxx, Holding, Hudson, and Meadows, who had already voted against borrowing to allow the National Flood Insurance Program to pay its obligations to victims, were joined in the latest vote by Representatives Coble, Ellmers, Jones, McHenry, and Pittenger.

All four NC Democratic representatives voted for the measures.

A closely-related measure that combined both parts of the House bill passed the Senate late last term with a bipartisan 62-32 vote. Democratic Senator Hagan voted for that measure; Republican Senator Burr voted against.

I can't predict the weather. But I can predict that the "attaboys" the Republican delegation are getting from its Tea Party supporters will be replaced with cries for federal relief when a big storm eventually hits Hurricane-prone NC.

Tuesday, January 15, 2013

Carolina Panthers' owner, Jerry Richardson, has his hand out asking the city of Charlotte to fork over $125 million to renovate and upgrade Bank of America Stadium. Regrettably (for the citizens of Charlotte who would have to foot the bill), members of the Charlotte City Council have expressed a willingness to help, and the Council has discussed an extra 1 percent ($24 million annual or $32 per resident) tax on food and beverages to cover the cost.

There is another financing option that could save Charlotte taxpayers and shift the most of the costs to the actual beneficiaries--issue $125 million in city-guaranteed bonds with an agreement that the stadium owners will pay back the bonds.

Sunday, January 13, 2013

Although the increasing possibility of fracking in the Tar Heel state has many North Carolinians in a dither, there's actually another mineral extraction opportunity just over the border in Chatham, Virginia that could be much, much worse.

Virginia's General Assembly might make that opportunity a reality very soon.

Saturday, January 12, 2013

State Sen. Fletcher Hartsell Jr. spent nearly $100,000 of his campaign’s money in 2011 and 2012 paying off debts on at least 10 personal credit cards, according to new campaign finance reports.

...The disclosure forms also show the campaign writing checks to two banks and a credit union in relatively large amounts. Last month, for example, the Hartsell campaign paid the State Employees’ Credit Union $750. The listed purpose of the spending is “bank transfer.” Hartsell said he could not immediately explain the bank spending and would not rule out cash withdrawals.

Sen. Hartsell was unopposed in his most recent primary and general election campaigns, so you really have to wonder why the contributions were needed in the first place. Just as Pig-Pen from Peanuts was the only kid who could create a dust cloud in a snow-storm, Sen. Hartsell seems to have a rare ability to create expenses in uncontested elections.

It is probably not too surprising that Sen. Harsell's Legislative Ethics Committee found no violations whatsoever last year (heck, it even managed to dismiss more complaints than it received).

Sen. Hartsell's campaign finance reports are available from the State Board of Elections website. If his 2nd quarter 2008 report is any indication ($8,872.66 paid to cover his personal American Express card), Sen. Hartell's questionable reporting goes back a ways.

Gov. Bobby Jindal is proposing to eliminate Louisiana's income and corporate taxes and pay for those cuts with increased sales taxes, the governor's office confirmed Thursday. The governor's office has not yet provided the details of the plan.

Do ya ever get the feeling that these folks are all reading off the same script?

Friday, January 11, 2013

The North Carolina Department of Public Instruction Released its Annual Consolidated Data Report for 2011-12 for school crime and violence, suspensions and expulsions, and dropout rates. Statewide, the reported number of criminal and violent acts decreased 4.3 percent from the previous year from 11,657 to 11,161. The offense rate (number of acts per 1000 students) fell 5 percent from 8.03 to 7.63.

In Guilford County, the decrease was even more pronounced with the number of reportable acts decreasing from either 693 or 700 (there's a minor discrepancy in the 2010-11 numbers) to 589. Figures for all reported offenses for the Guilford County Schools from the 2005-06 school year to 2011-12 are listed below.

Thursday, January 10, 2013

Suppose that you had a perverse desire to maximize tax inefficiency--that is, maximize the administrative and compliance costs of taxes while minimizing the net revenues and net social benefit. What would you do? One strategy would be to enact a special tax charge and a special tax break the same activity.

This strategy sounds and is perverse, yet it is exactly what North Carolina does with appliance sales.

On the one hand, the state applies a White Goods Disposal Tax of $3 on each appliance sale to defray state and local waste management costs associated with appliances (e.g., special disposal of refrigerants). The Disposal Tax comes on top of the regular sales tax.

On the other hand, the state holds an Energy Star Sales Tax Holiday on the first weekend of each November in which sales taxes are waived for purchases of special energy-efficient appliances.

North Carolina also exempts the installation charges for those appliances (and installation charges generally, if the charge is separately stated on a receipt) from sales taxes.

The editorial in this morning's News & Record lambastes Congress for including a host of additional business tax breaks in the recently-enacted fiscal cliff legislation, including $15 million over two years for films shot in the U.S and a $70 million break over two years for NASCAR .

When the editorial staff finishes cooking their federal goose, they might take a gander at the special-interest tax goodies that are parts of the North Carolina tax code. According to the NC Department of Revenue, the state provides a $35.8 million annual corporate tax break to in-state movie production, including a refundable tax credit (the tax credit is set to expire in 2014) and $400,000 in tax breaks for aviation fuel and vehicle parts used in "professional motorsports." Motorsports facilities are also classified as a special business class that are eligible for tax credits for adding jobs or investing in property.

Wednesday, January 9, 2013

In Leviathon, Thomas Hobbes famously conjectured that life in the state of nature, with every man against every other, is "nasty, brutish, and short." A scientific report by a panel of the National Research Council, U.S. Health in International Perspective: Shorter Lives, Poorer Health, has concluded much the same thing about life in the U.S. in the 21st century.

From the report summary (bold from the original)

The panel was struck by the gravity of its findings. For many years, Americans have been dying at younger ages than people in almost all other high-income countries
... This disadvantage has been getting worse for three decades, especially among women. Not only are their lives shorter, but Americans also have a longstanding pattern of poorer health that is strikingly consistent and pervasive over the life course -- at birth, during childhood and adolescence, for young and middle-aged adults, and for older adults.

In almost every category you could imagine--infant health, injuries and homicides, sexually transmitted diseases, drug abuse, diabetes, heart disease--Americans suffered worse outcomes than most other developed countries, leading to especially high odds of dying before age 50.

Even worse, the reasons for these disparities are as unnecessary as they are tragic. The panel cited gaps in our health system (especially the lack of insurance), poor health behaviors (especially over-eating and drug abuse), accidents, violence (especially the availability of firearms), poverty, social immobility, and physical environments that discourage natural exercise. As the NRC panel states, "The tragedy is not that the United States is
losing a contest with other countries, but that Americans are dying and
suffering from illness and injury at rates that are demonstrably unnecessary."

Many of these gaps are addressable, but one party seems determined to widen, rather than close, nearly every addressable one. That party's fiercely professed "respect for life" is belied by a host of policies that promote death.

Last month, a North Carolina legislative panel recommended requiring people to obtain a doctor's prescription in order to purchase over-the-counter cold medicines with pseudoephedrine, an ingredient that can be used to produce methamphetamine. NC already prohibits off-the-shelf sales of cold medicines, limits the number of purchases during a single visit and during a month, requires photo identification for purchases, and requires customers' names to be entered into a central, searchable database. Nevertheless, the legislative panel wants even more onerous and costly restrictions--restrictions that would add the time and expense of a doctor's visit the cost of a cold medicine purchase. The panel cites the continuing rise in meth lab busts as evidence of a worsening meth problem.

What's behind the increase in meth lab busts? Much of the rise can be traced to the very laws that the legislature has already put in place, as NC's Attorney General, Roy Cooper, inadvertently explained in a press release yesterday.

Meth lab busts in North Carolina reached a new high in 2012 as a simpler method for making small amounts of the drug spread statewide. At the same time, electronic tracking of pseudoephedrine buys is helping stop illegal sales and leading law enforcement to more meth labs, Attorney General Roy Cooper said Tuesday.

...State Bureau of Investigation agents responded to 460 meth labs in 2012, compared to 344 meth labs in 2011 and 235 labs in 2010. Approximately 73 percent of the meth labs busted in 2012 used the “one pot” method. One pot labs, also known as shake and bake labs, make smaller amounts of meth than previously seen larger meth labs. Criminals can cook meth in a plastic soda bottle using a small amount of pseudoephedrine, the illegal drug’s key ingredient found in cold medicine.

A new electronic system that tracks purchases of pseudoephedrine is helping to block illegal sales of that key ingredient and lead law enforcement to meth labs, Cooper said. Approximately 54,000 purchases, a total of more than 66,000 boxes of pseudoephedrine, were blocked last year in North Carolina by pharmacies using the system, called the National Precursor Log Exchange (NPLEx). The amount of pseudoephedrine blocked could have been used to make 277 pounds of meth.

Making it harder to get the key ingredient has prevented an increase in the number of larger labs and has forced some criminals to use the one pot method.

There is no evidence that meth production is up. Meth busts have risen because of an increase in enforcement that is tied to last year's law. Also, the vast majority of busts that are being made involve much, much smaller labs than previous years--due also to changes in the law.

The proposed prescription requirement would increase money costs, increase time costs, and generally inconvenience all North Carolininians. The requirement would discourage many, many more legitimate purchases (another cost) than illegitimate purchases. The increase in meth lab busts provides no justification whatsoever for imposing those widespread and very real burdens.

Friday, January 4, 2013

North Carolina Tea Party Reps. Virginia Foxx (NC-5), Richard Hudson (NC-8), Mark Meadows (NC-11), and George Holding (NC-13) joined 63 other Republicans in voting against H.R. 41 to allow the National Flood Insurance Program to borrow $9.7 billion to assist victims of Hurricane Sandy who had paid their flood insurance to receive benefits.

Apparently, North Carolinians are never in need of this help. Oh wait, they are!

Preliminary statistics from the Centers for Disease Control indicate that the number of deaths in the United States attributable to firearms rose from an upwardly revised 31,672 in 2010 to 32,163 in 2011. The increase mainly reflected increases in firearms-related suicides (up from 19,392 in 2010 to 19,766 in 2010) and accidents (up from 606 in 2010 to 851 in 2011). The number of firearms-related homicides was essentially unchanged (edging up slightly from 11,078 in 2010 to 11,101 in 2011).

The unadjusted mortality rate from firearms (number of firearms-related deaths per 100,000 people in the population) remained constant from 2010 to 2011 at 10.3. The age-adjusted mortality rate from firearms was also constant (10.1 in both years). In contrast, the overall number and rates of homicides fell. Also, the overall age-adjusted mortality rate from all causes fell.

On an age-adjusted basis, people were more likely in 2011 to be killed by a firearm-related suicide or accident (6.4) than to be killed by any type of homicide (5.2; the firearms-related homicide rate was 3.6). Age-adjusted firearm-related death rates were higher than the age-adjusted rates for HIV (2.4), liver disease and cirrhosis (9.7), Parkinson's disease (7.0), and prostate cancer (8.3), but lower than the age-adjusted rates for motor-vehicle accidents (10.9), septicemia (10.5), pancreatic cancer (10.9), and breast cancer (12.0).

If the CDC broke out the figures, age-adjusted firearms-related mortality would have been the 11th leading cause of death in the U.S.

A few weeks ago, Wayne LaPierre, the foaming at the mouth executive vice president of the National Rifle Association, excoriated the entertainment industry for promoting violence and contributing to the Newton school shootings.

...I mean we have blood-soaked films out there, like “American Psycho,”
“Natural Born Killers.” They’re aired like propaganda loops on
Splatterdays and every single day.

1,000 music videos, and you all
know this, portray life as a joke and they play murder -- portray
murder as a way of life. And then they all have the nerve to call it
entertainment. But is that what it really is? Isn’t fantasizing about
killing people as a way to get your kicks really the filthiest form of
pornography? In a race to the bottom, many conglomerates compete with
one another to shock, violate, and offend every standard of civilized
society, by bringing an even more toxic mix of reckless behavior, and
criminal cruelty right into our homes. Every minute, every day, every
hour of every single year.

A child growing up in America today witnesses 16,000 murders, and
200,000 acts of violence by the time he or she reaches the ripe old age
of 18. And, throughout it all, too many in the national media, their
corporate owners, and their stockholders act as silent enablers, if not
complicit co-conspirators.

What has LaPierre's NRA been doing to help curb the culture of violence? Pimping that exact form of pornography in exhibits glorifying the firearms used in violent television shows and movies at its National Firearms Museum.

Media Matters for America has a video of the museum's curator boasting about an exhibit that includes the shotgun used by Heath Ledger as the Joker in The Dark Knight and the shotgun used by Javier Bardem in No Country for Old Men. Or as the curator puts it, "some of the firearms that we've fallen in love with in our youth and our adulthood wishing that we too could be like our matinee idols."

Thursday, January 3, 2013

How cruel is the proposal by the John W. Pope Civitas Institute to replace North Carolina's progressive income, corporate, and privilege taxes with expanded sales, franchise, and real estate transfer taxes? It could literally cost amputees their artificial arms and legs and diabetics their insulin.

The sales tax elements of Civitas's proposal include increasing the tax rate from its current level of 6.87 percent on average (4.75 percent at the state level and 2.00-2.50 percent at the local level) to 8.05 percent and expanding the tax base. The largest part of Civitas' tax base expansion (and the largest gain in anticipated revenues) comes from "repealing current exemptions, preferential rates, and refunds" (p. 4). Civitas provides almost no detail for what these "exemptions, preferential rates, and refunds" include, leaving the impression that they are just a bunch of loopholes.

Every other year, the North Carolina Department of Revenue (NC DOR) compiles a list and estimates the value of tax "expenditures" (the value of exemptions, deductions, special rates, etc.) throughout the state's tax code. The latest estimates come from 2011 and generally provide estimates of the value tax "breaks" for 2011-12. An examination of these items reveals why Civitas was silent on these details.

The table below lists some of the items that would be included in Civitas' proposal.The table also lists the NC DOR estimate of the value of the state taxes saved in 2011-12 under the existing 4.75% rate and an estimate of how much the 8.05% Civitas sales tax would cost.